I recently discovered Vermilion Energy (TSX:VET), a Canadian oil and gas producer which is listed on both the TSX and NYSE exchanges. In the last decade, it returned 25% annually. Since it is a mid cap company, it’s more stable than a small cap, while has higher growth than a large cap. My research indicates that it provides a safe dividend with a current yield of 4%. With its low payout ratio, there’s also potential for future dividend growth. Enrolling in Vermilion Energy’s dividend reinvestment program allows dividends to be reinvested with a 3% discount.
Here’s a summary of my research:
- Vermilion Energy has stellar historical returns, returning 25% annually in the last 10 years.
- It has an S&P credit rating of BB-.
- Between 2013 and 2016, it plans to grow production by 55%, and to grow funds from operations by 60%.
- Since 2003, Vermilion has paid a monthly dividend, and has never cut it. It currently yields 3.9%.
- Since 2003, the payout ratio has been in a downtrend. That led to 2014’s dividend growth, and potential for further raises in future years.
- Because Vermilion Energy focuses its business in 3 core areas: Canada, Europe, and Australia, Vermilion has an international diversification advantage, contributing to its relatively high operating netback, and a high operating margin compared to its peers.
- Vermilion Energy’s total return beats all its Mid Core peers in the 1-year, 3-year, 5-year, 10-year, and 15-year periods.
- Analysts estimate a one-year total return of 18%-21% at Friday’s closing price, depending on whether an investor is buying it on the NYSE or TSX.
- Its reserve life index is over 12.3 years, so there’s plenty of time for it to run.
- Amid smelling the roses, let’s not forget about its thorns. Vermilion Energy’s business performance is affected by four main factors:
- Commodity prices of oil and gas;
- Foreign exchange rates between the euro, the Australian dollar, the U.S. dollar, and the Canadian dollar;
- Its production and sales volumes; and
- The government regulations and income tax regimes of where Vermilion is doing business.
Read my full article at Seeking Alpha: A Gem in the Energy Industry: Buying Vermilion Energy for Growth and Income
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Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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